Steel overcapacity to resume growth in 2020: OECD

The gap between global production and capacity is expected to reach 700 million tonnes in 2020, increasing for the first time since 2016, the OECD steel committee said during its latest session held virtually.

The association noted the latest available data from the OECD show that global steelmaking capacity could increase to 2,455.8m t/year. This new growth would widen the gap between production and installed capacity following a series of declines in the 2016-2019 period, Kallanish notes.

This year, global excess capacity could rise by 41.8mt, mainly supported by new capacities becoming available in the Middle East and Asia. “The Committee noted with concerns that a number of planned capacity increases are premised on expectations of an increase in future demand, including demand in export markets,” the OECD commented.

The growth of capacities together with the difficulties created by the outbreak of the coronavirus are expected to fuel uncertainties this year. There are concerns, moreover, over the continued growth of Chinese production despite the fall of demand for steel globally. “The Steel Committee noted with concern the divergence from the global trend in China, where steel production reached record volumes in the first semester of 2020, and where inventories have reached historically high levels,” it observed.

“These developments pose a risk of oversupply in China exacerbating global imbalances resulting from the Covid-19 demand shock,” OECD said. “In this context, the Steel Committee recognized that the work of the Global Forum on Steel Excess Capacity (GFSEC) has become more important than ever.”